EU split scuppers wine tax

Minutes from the meeting of the EU Council of Economics and Finance Ministers said representatives had failed to agree on suggestions for a new EU minimum rate covering all alcoholic drinks, after opposition from wine nations.

"12 member states vehemently opposed any proposal aimed at establishing a higher minimum excise duty for wine,"​ added the Council meeting summary.

Council members did agree to get the EU Commission to draw up proposals adjusting the original duty rates for beer, spirits and fortified wine set in 1992, though a Commission spokesperson said these would probably not be ready until next year.

And with continued opposition from the wine-producing nations, including big players like France and Italy as well as smaller powers like Hungary and Slovenia, wine may again have to be left out of the equation altogether for now.

Current minimum rates, which were introduced in 1993, left the base rate for wine at zero, effectively leaving the decision of whether or not to set any tariff up to member states themselves.

Very few of the EU's main wine producing countries have introduced an excise duty above zero.

Italy, Slovenia, Spain, Slovakia and the Czech Republic have all left their rates at zero, while France and Hungary have only imposed a tariff of €0.02 per 70cl bottle. This has angered non-wine producing countries like Sweden and Finland, which have higher duty rates and want others to catch up.

Last year, the Commission published a report on EU alcohol taxation suggesting its support for a new EU-wide excise rates framework covering all alcoholic beverages, yet conceded"the issue of wine taxation remains a very controversial and politically sensitive issue"​.

Governments in all wine-producing countries may fear a domestic political backlash from their wine industries if they force them to swallow increased excise rates when already feeling the heat of competition from foreign brands, especially those from the New World.

France in particular has seen a raft of vintner protests in recent months accusing the government of failing to support the industry, and lambasting a government public health campaign warning people to cut down on their alcohol intake.

Yet fragile wine industries in emerging Eastern European markets are also under significant pressure from foreign competition that threatens to steal domestic markets.

Slovenian wine-makers currently control around 95 per cent of the domestic market but Dusan Brejc, managing director of the Commercial Union for Viticulture and Wine of Slovenia, told www.Cee-FoodIndustry.com​ he had concerns fro the future.

"The market for the big players is quite small so we're not expecting a lot of interest, but in a few years we might lose 20 per cent of our market share,"​ he said.

And Anne Nugent, research manager at market analyst group Euromonitor​, said:"Domestic consumption shows there is potential for good growth, though this will probably be a longer term trend. In the shorter term, there may be a shift towards imported varieties; a lot of companies are looking to Eastern Europe."​

Any new tax on wine may therefore frustrate vintners further, leading to political protests. The French government is concerned that any more high-profile interference from Brussels will cause the French people to reject the EU Constitution in an up-coming referendum.

Nevertheless, the EU Council meeting on Tuesday did agree on the need to increase the existing alcohol duty rates set in 1992, and work towards greater harmonisation of rates between members to avoid fraud and smuggling on the market.

"It is clear to all that the widely divergent levels of alcohol taxation in member states distort the market and facilitate fraud and smuggling, but without the agreement of all member states nothing can change,"​ said former taxation commissioner Frits Bolkestein.

The Council also largely agreed with the Commission that member states should consider raising the minimum excise duties for beer, spirits and fortified wine at least in line with inflation. This would mean an increase of around 24 per cent.

Such an increase would leave many countries' rates unaffected, though the push towards harmonisation may bring greater change.